We commonly see clients whose parents have very generously provided financial assistance to them during their relationship – whether that be to assist with buying a house, renovations or just because they love you. However, the line can often be blurred as to whether that money was a “gift” or a “loan”. This distinction becomes important if you separate from your partner. Senior Associate, Kerry Ktenas outlines the importance of getting advice.
Is the money a gift or a loan?
The money will be considered a gift if there is no expectation for it to be repaid. If you separate, a gift from your parents will be considered as a financial contribution by you towards you and your partner’s assets.
The money will be considered a loan if there is an expectation for it to be repaid. If you separate, the loan will considered as something that needs to be repaid from you and your partner’s assets. If it was a loan, it should be documented so there is no question as to whether it ought to be repaid.
If your parents are intending to give you money and it is meant to be repaid, we can talk to you about your options.
Keeping property in your parents’ name
We often see clients who put their property in their parents’ name to try and protect it from their partner. Putting property in your parents’ name does not automatically exclude it from you and your partner’s assets. It could result in your parents being joined as parties to any Court proceedings.
In a recent matter, a number of properties were transferred into in the name of a party’s in-laws. One of the arguments in Court was who actually owned the properties and if the couple contributed towards the purchase. The in-laws were joined as parties to the matter and were required to give evidence and about the ownership of the properties.
Your Relationship Status
Recently engaged or moving in together? You should consider a Binding Financial Agreement (also known as a pre-nup) if you want to protect a particular asset from your new partner. We can assist you with understanding if a pre-nup is necessary and prepare the agreement.
Separating? Separating from your partner can be a daunting experience and it’s difficult to know where to begin or what you need to do. We can assist you with understanding your entitlements and explain the legal process.
It is important to get the right advice
We are highly experienced in providing advice to those recently engaged, de facto couples, married or separated. To avoid finding yourself (or your parents) in a difficult situation, call us on 8602 2000 to understand your options.